BRICS Summit: Paving way for de-dollarisation and new trade system beyond SWIFT?

BRICS Summit: The ongoing BRICS summit, from  October 22-24, 2024, in Kazan, Russia, is going to be remembered as the first meeting after the January expansion of this bloc. With over thirty countries, including NATO member Türkiye, voicing interest in joining the bloc, the summit is likely to take critical decisions that could see a redesign of international relations. The key highlight of the summit this time is to come up with an alternative to the US dollar and an alternative to the SWIFT payment settlement system.

What exactly is de-dollarisation? According to a JP Morgan research note, de-dollarisation entails a reduction in the usage of dollars in global trade and financial transactions. In recent times, the clamour for de-dollarisation has grown like never before. The US dollar, which is used as a reserve currency by the world, is losing its sheen. The world has already been attempting to move away from the dollar; Russia, which is the second largest exporter of oil, is settling its transactions in local currencies.  Similarly, central banks across the world are buying gold to diversify from the dollar-centric financial system.

A few months back, Minister of External Affairs, S Jaishankar recently commented on a US think tank in which he said, “India has no malicious intent towards the dollar”. He went a step ahead and clarified that India is not targeting the US dollar and that de-dollarisation is not part of India’s economic policy. He did share his concern and said that US policies often complicate its trade with certain countries and therefore India is seeking “workarounds” to deal with trade partners who lack dollars for transactions.

Now BRICS Pay, as launched by BRICS with the support of Russia and China, is all about de-dollarisation and finding an alternative to the SWIFT payment settlement system. According to the reports, the President of the Russian Federation Council at the official announcement of BRICS Pay said, “BRICS Pay is no longer just an idea, it is a concrete project that is rapidly advancing.”

Dollar still holds a dominant position in the international payment system outside the eurozone, it still constitutes 58 per cent of international payment outside the eurozone.

US Panics to Stay in the Game

In this scenario, the US and its allies are reported to be on red alert. The Republican presidential candidate, Donald Trump, has gone a step further to threaten imposing a 100 per cent tariff on countries switching away from the US dollar. Latest reports say the US is rather intensely attempting to scuttle the Kazan summit, where it is reportedly exerting pressure on invited nations to force some of them to back out or send low-level delegations.

India Important in BRICS Agenda

India is one of the BRICS founding members, so the country could make important contributions to the debate about expansion and de-dollarisation. Since the other BRICS members are already very interested in taking advantage of new economic opportunities without forfeiting their relationship with the U.S., Indian External Affairs Minister S. Jaishankar's latest remarks suggest why India remains cautious about a move it describes as de-dollarisation while maintaining its intention not to penalise the dollar but to find alternatives in accommodating complications in trade.

Shift in Economic Power Internationally

As per available reports, BRICS has surpassed the G7 in the purchasing power parity scale. As more members join the bloc, it is a signal that the world is slowly drifting away from the economic hegemony of the United States towards another superblock. Most importantly, the entry of Türkiye into BRICS can become an opportunity for other NATO and EU members to join the superblock. And therefore, this can increase tension within the Western alliances.

As the BRICS summit is about to take place, all international onlookers will be keenly watching the complexity of those interactions between the powers. Decisions taken in Kazan could mean significant shifts globally in the economic structures and forms of political alliances, especially in the spirit of US dominance and emerging multipolarity.